How to Pick a Growth Mutual Fund

Trying to pick the best growth mutual fund for your portfolio can be challenging. Investing in a growth mutual fund should be part of your long-term investment strategy because it will help build your investment dollars. Here are some of the basics of how to pick a growth mutual fund.

Read the Prospectus

When truly evaluating a mutual fund, one of the first things you will want to look at is the mutual fund prospectus. The mutual fund prospectus is a document that is published by the mutual fund provider every quarter or year. This document provides you with a wealth of information about the mutual fund and will help you make an educated decision.

Investment Strategy

When looking at the prospectus of a mutual fund, one of the first things that you will want to look at is the investment strategy that is utilized by the fund. Some mutual funds value a regular income for their investors over growth. Other mutual funds, try to use a balanced approach that mixes income and growth. However, if you want pure growth out of a mutual fund, you will want to make sure and select a mutual fund that is trying to achieve growth. You can read about the investment strategy of the fund and decide if it meshes well with your personal investment goals.

Fund Manager

The mutual fund prospectus will also tell you about the fund manager that is in charge of the mutual fund. The fund manager makes all of the investment decisions for the mutual fund. You are essentially giving them your investment dollars to do with as they please. Therefore, you have to put a lot of faith in this person or team of people. You want to see a fund manager that has a good history of growing portfolios. You should be able to find out about their track record and see if you feel comfortable giving them your money. If they are relatively new with this mutual fund, you want to see what they did before they started working for this particular fund.

Holdings

Something else that you should look at when choosing a mutual fund is the holdings of the fund. If you value growth, you want to see the vast majority of the holdings in stock. Take a look at the individual stocks that make up the portfolio. Some stocks are purchased just for the dividend and safety that they provide. However, the stocks do not traditionally grow very much. If you value growth, you want to see a portfolio of stocks that have a high potential for growth. For example, you want to see some smaller companies that are poised for the future and larger companies that are not content with where they are in the market.

Expense Ratio

The expense ratio is the amount of money that you have to pay on an ongoing basis for the fund. You want to find a fund that has a very reasonable expense ratio because they will eat into your profits quickly.

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